Advertising Industry News SampleOct 24, 2005 14:00:47
INTERPUBLIC GROUP: S&P Affirms B+ Corporate Credit Rating
UNITED STATES (SunStream News) -- Standard & Poor's Ratings Services affirmed its ratings on The Interpublic Group of Cos. Inc., including the 'B+' long-term corporate credit rating. All ratings were removed from CreditWatch, where they had previously been placed with negative implications. The outlook is negative.
New York, New York-based global advertising agency holding company Interpublic had approximately $2.2 billion in debt outstanding at June 30, 2005.
"The rating action acknowledges that Interpublic has completed a $525 million preferred stock offering, which will help the company to maintain adequate liquidity despite increased financial requirements," said Standard & Poor's credit analyst Alyse Michaelson Kelly.
Considerable cash outlays could be made over the next 24 months related to the company's financial restatement, at the same time that substantial professional fees are significantly diminishing Interpublic's cash flow. The preferred stock is perpetual and is convertible into common stock at any time at the option of the holder.
However, it does not contain mandatory conversion terms and does not permit deferral of dividend payments. Because the preferred issue contains both debt-like and equity-like terms, we will base our analysis on debt to EBITDA ratios that both include and exclude this issue.
The rating on Interpublic reflects its weak revenue growth and profitability compared with peers, high leverage, and ongoing material weakness in internal controls, and concerns about the company's ability to maintain existing accounts and generate new business. These factors are only partially offset by Interpublic's portfolio of advertising and communications services brands known for their creative capabilities, its broad geographic and business diversity, and healthy cash balances.
Additional concerns relate to an ongoing SEC investigation into the company's accounting problems, the time and costs required to remedy accounting and financial reporting challenges, and the potential for shareholder litigation and further restructurings.
Interpublic's revenue, margin, and cash flow trends have underperformed the other major global advertising agency holding companies. Performance at the company's flagship McCann WorldGroup will be an important driver of Interpublic's overall results; this group is endeavoring to restore margins and revenue growth.
At the same time, major account losses underscore the problems at other key agencies and in Interpublic's media-buying and planning businesses.ss/tcr
Source: Troubled Company News -- US & Canada
Publication Date: 2005-10-24
COY: IPG
IND: ADV
GEO: n-us
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